Adidas Risks Losing Money as Kanye Fashion Sales Remain Uncertain

Adidas has a big financial bind after severing ties with Kanye West over his antisemitic comments last year. It expects to lose around $1.3 billion in sales and $535 million in operating profit this year if it can’t sell its Yeezy shoes and clothes designed by the rapper, according to a new report from Bloomberg.

Legacy of Kanye West and Yezzy

West’s partnership with Adidas on the Yeezy line was one of its most lucrative and sought-after collaborations. It brought the brand back to relevance in North America and has helped drive its sales. But the relationship had deteriorated since October when West made antisemitic remarks on Twitter that Adidas condemned.

Several brands, including Balenciaga and Gap, dropped Yeezy products after the public outcry. Now, West is reportedly angry with the company for not giving him enough control over the design process. In several social media posts, he criticized the company’s CEO, Kasper Rorsted, and other executives and posted doctored images of board members.

The company has not said how it will handle the Yeezy line in the future, but its ownership of the Yeezy designs could pose legal challenges. If Adidas wants to continue selling the shoes, it will need permission from West to do so — and that’s unlikely to happen.

Former Yeezy and Adidas employees say West has used his influence to intimidate designers and staff. They also allege that he pushed a product to the top of the list when it was in development because he sexualized it.

While the Yeezy line is not as large as Nike’s, it remains a valuable asset for Adidas because of its popularity among collectors. It is expected to generate 4 to 8 percent of the company’s revenue this year, according to Cowen analyst John Kernan.

Adidas Shortens Legacy

But a recent report by Forbes suggests that the German sportswear giant might be forced to cut the price of Yeezy merchandise dramatically if it can’t sell it. The newspaper cites an anonymous source to claim that Adidas plans to mark down the merchandise from its original retail prices by as much as $100 per piece.

That would be a major hit to the bottom line for the German company, which has seen its shares plummet after the Yeezy scandal. As a result, it’s laying off staff and reevaluating its marketing strategy, according to the report.

YE and Controversery

The move comes after the rapper’s YZY collection at Paris Fashion Week featured models wearing shirts that read “White Lives Matter” and a pair of black-and-white sneakers that displayed a racist message written in white letters on the sole. And it isn’t the first time West has criticized the fashion industry for not giving him enough credit.

Another Yeezy designer, Christian Siriano, has already been fired by Adidas after an antisemitic tweet. And last week, Balenciaga said it was severing ties with West over his antisemitic and xenophobic comments.

Despite his alleged creative differences with Adidas, West hasn’t given up on his Yeezy brand. He debuted his latest collection Thursday night, dubbed “Yeezy: Season 1” in New York City.